UNIT 1: INTRODUCTION
1. Micro Economics
3. Central Problems of an Economy | Basic Economic Problems
(a) What to Produce?
(b) How to Produce ?
(c) For whom to Produce?
4. Causes of an Economic Problem
5. Production Possibility Curve
6. Marginal Opportunity Cost–MOC
7. Marginal Rate of Transformation
8. Opportunity Cost
- MICRO ECONOMICS:
It is a study of behaviour of individual units of an economy such as individual consumer, producer etc.
- ECONOMY: An economy is a system by which people get their living.
- ECONOMIC PROBLEM: “An economic problem is basically the problem of choice” which arises due to scarcity of resources having alternative uses”.
- CAUSES OF ECONOMIC PROBLEM:
a. Scarcity of resources
b. Unlimited wants
c. Limited resources having alternative uses
- BASIC (CENTRAL) ECONOMIC PROBLEMS
a. Allocation of resources
• What to produce?
• How to produce?
• For whom to produce
b. Efficient Utilization of Resources
c. Growth of resources
- PRODUCTION POSSIBILITY CURVE (PPC):
PP curve shows all the possible combination of two goods that can be produced with the help of available resources and technology.
- MARGINAL OPPORTUNITY COST: MOC of a particular good along PPC is the amount of other good which is sacrificed for production of additional unit of another good.
- MARGINAL RATE OF TRANSFORMATION: MRT is the ratio of units of one good sacrificed to produce one more unit of other good.
- SCARCITY OF RESOURCES: Scarcity of resources means shortage of resources in relation to their demand.
- OPPORTUNITY COST: It is the cost of next best alternative foregone.